What Aussie homeowners need to know before making their next financial move.
Pay down your loan: Cut interest costs, build equity, and reduce financial stress.
Invest instead: Aim for long-term growth but be ready for some risk.
Or do both: Use offset accounts or equity to stay flexible while building wealth.
For many Australians with a home loan, the question eventually comes up: Should I put extra money into my mortgage, or would I be better off investing it elsewhere?
It’s not a simple yes-or-no answer. Both strategies can move you forward financially, but which one is right for you depends on your goals, time frame, and how comfortable you are with risk.
Let’s break it down.
What’s the financial dilemma?
Whether you’ve built up a healthy savings buffer, received an inheritance, or simply want to make the smartest use of your surplus income, the core question is the same:
Is it better to pay off my home loan early, or invest that money instead?
At the heart of this decision is a trade-off between guaranteed savings (from reduced mortgage interest) versus potential returns (from investing in shares, property, or other assets).
Why this decision matters in 2025:
Interest rates are still high: Many variable loans are hovering around 6% p.a. or more
Investment returns vary: Historical share market returns average 7-9% p.a., but come with risk
Cost of living pressures: Every dollar counts, and long-term planning is more important than ever
When paying off your mortgage might make sense
If you’re someone who values certainty and peace of mind, paying down your loan early can feel like the smart move, and for good reason. It offers immediate, risk-free savings by cutting down the interest you’ll pay over the life of your loan.
You’ll also build equity faster, which could open up future opportunities like refinancing or tapping into that equity to invest. With a smaller loan balance, your minimum repayments drop too, easing financial pressure. And ultimately, it puts you on track to hit that coveted debt-free milestone sooner than expected.
Who this suits:
Risk-averse homeowners who prefer certainty over market ups and downs
People nearing retirement, looking to be mortgage-free by a set date
Borrowers on high variable rates, where interest savings are significant
How Aussie can help:
Track your real-time home equity and repayments with Live Equity in the Aussie App. It’s a smart way to see the impact of extra repayments over time and how close you are to being debt-free.
You might also be interested in: How do mortgage repayments work?
When investing could be the better strategy
On the flip side, investing your spare cash (instead of putting it into your home loan) could help you build wealth faster, especially if your investments earn more than your mortgage interest rate.
The benefits:
Higher potential returns: Investments like shares or property may grow more than you’d save in interest
Compound growth: The earlier you invest, the more time your money has to grow
Liquidity and flexibility: Unlike extra loan repayments, investments can often be accessed or sold
Tax benefits: Depending on your situation, negative gearing or franking credits may apply
Who this suits:
Younger borrowers with time to ride out market fluctuations
Confident investors with a diversified, long-term strategy
Homeowners with fixed low-rate loans, where the opportunity cost of not investing may be higher
Keep in mind: Investing always carries a level of risk. There are no guaranteed returns, and past performance doesn’t predict the future.
You might also be interested in: How a mortgage broker can help you invest in property
Key factors to consider before you decide
No two financial situations are alike. Here’s what to weigh up when deciding whether to invest or pay off your home loan.
Factor | Pay off mortgage | Invest |
|---|---|---|
Interest rate | High interest = greater savings from early repayment | Lower rate = potentially better to invest |
Risk tolerance | Low, prefer predictable outcomes | Higher, comfortable with market swings |
Loan term | Nearing end of loan, want to be debt-free | Longer time horizon, room to grow assets |
Tax position | No tax on savings from interest saved | Investments may offer tax advantages or create tax liabilities |
Goals | Focused on security and reducing debt | Focused on wealth-building and diversification |
Still unsure? A conversation with your accountant or an Aussie Broker can help you model both paths side-by-side and even explore a third option: doing both.
What do the numbers say?
Let’s run a simplified example to compare.
Scenario:
You have an extra $10,000 and a $500,000 mortgage at 6% p.a. with 25 years remaining.
Option 1: Pay off mortgage
You’d save roughly $15,000 in interest over the life of the loan*
It’s a guaranteed return equivalent to 6% p.a., risk-free
Option 2: Invest in diversified shares (avg 8% p.a. over 25 years)
Your $10,000 could grow to $68,485
After capital gains tax (CGT), the return might be closer to $50,000-55,000 net
But remember, investments can go up and down. There’s no guarantee you’ll achieve those returns, especially in the short term.
Other strategic options to explore
Sometimes, it doesn’t have to be all or nothing. Here are some hybrid strategies that can help you strike the right balance.
1. Split your surplus
Use part of your extra funds to pay down the loan and the rest to invest. It’s a balanced way to build wealth and reduce debt.
2. Use an offset account
Rather than locking extra repayments into the loan, park them in an offset account. You’ll still reduce interest payable but maintain access to your cash if needed.
3. Tap into equity to invest
If you’ve built enough equity, you may be able to refinance and use some of that value to invest, either in property or other asset classes.
Want to explore this path? An Aussie Broker can help you calculate your borrowing power and identify lenders that suit your goals.
You might also be interested in: What is home equity and how to access it
Need help deciding what’s right for you?
This isn’t just a numbers game: it’s about your life goals, your peace of mind, and what financial success looks like for you.
Some people sleep better knowing they’re chipping away at their home loan. Others get excited by the idea of their investments growing. Both are valid and with the right guidance, both can work.
At Aussie, we’re not here to push one path over another. We're here to help you:
Understand your options in plain English
Model real-world scenarios based on your situation
Connect the dots between your mortgage, investments, and lifestyle goals
Whether you're looking to invest smarter, pay off faster, or a bit of both, we’ve got the tools, brokers and insights to help.
Ready to make a plan?
Book a free^ appointment with an Aussie Broker today to model your next step, whether that’s paying off more of your loan, investing for the future, or a combination of both.